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problem: Your task for this module is to use the concept of present value to your chosen company. Assume your company is selling a bond that will pay you 1000 dollar in one year from today. Consider that if your company has financial problems in one year you might not get your full $1000 back. Given that a $ one year from now is always worth less than a dollar today, you most certainly would not pay a full 1000 dollar for this bond. Given the concepts of the time value of money,

[A] find out the payment for this bond today? Take into consideration your own personal risk preferences, inflation, interest rates, & the probability your company will not be able to pay you back in one year.

[B] Based on your answer to the above problem, what would be your discount rate for the bond? Apply the present value formulas from the background materials.

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M919168

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